We recently travelled to Santiago, Chile, a sprawling city of six million people just beyond the Andes. Our purpose was to attend the first sub-regional workshop of the Climate Justice Dialogue, a new initiative led by the World Resources Institute (WRI) and the Mary Robinson Foundation—Climate Justice (MRFCJ). But before we even made it inside the conference center, we were confronted by a poignant, real-life example of climate justice.

Upon arrival in Santiago, a taxi took us to a charming and quirky family-owned hotel. As we were welcomed at the concierge desk, we were surprised to find Chile’s Second National Communication among the tourist books and magazines.

National communications are reports submitted by countries to the United Nations Framework Convention on Climate Change (UNFCCC). They provide scientific information about national climate mitigation and adaptation measures, as well as project proposals that help increase a country’s resilience to the impacts of climate change. They’re important documents for climate negotiators and policymakers because they hold countries accountable for their commitments under the UNFCCC. They are not, however, something you would expect to find as recommended tourist literature.

We asked the hotel owner why he displayed this document so prominently . He responded with a wise smile, “Because it is important.” He then explained how climate change is already affecting Chile’s tourism industry: The retreat of Andean glaciers affects the availability of freshwater for irrigation and domestic use, mountain recreation, and for the animals and plants that depend on glacier-melt for survival. It also makes the glaciers—as well as the related fauna and flora—less accessible to tourists, affecting his revenue. He also expressed his concern over the inadequate response to climate change from the international community, the national government, and a Chilean middle class that’s engaging in unsustainable consumption patterns. He concluded that climate change is part of Chile’s current and future reality, and therefore should matter to anyone who cares about his country—including tourists.

Now is a critically important time for the world to focus on climate finance. Developing nations—those least responsible for causing global warming but most vulnerable to its impacts—need funding to adopt clean energy, protect infrastructure from sea level rise, and engage in other adaptation and mitigation strategies. But these activities are costly—the world will need to figure out how to fund them now in order to protect countries from future climate change.

The problem is that it’s hard to draw attention to a topic that’s difficult to understand. The issue of climate finance is decidedly complex. Several entities--think-tanks, banks and other financial institutions, international institutions, governments, and public sector agencies--are involved in myriad activities related to climate finance. Understanding how they operate, interact, and contribute can be confusing. Even the vocabulary that defines climate finance can be inconsistent, abstract, and nebulous at times. These complexities make climate finance an issue that’s hard for people--even experts, sometimes --to wrap their heads around.

Introducing the Climate Finance FAQs Series

That’s where WRI’s new blog series, Climate Finance FAQs, comes in. Our experts will attempt to shed light on basic climate finance issues through a series of blog posts. By explaining these topics in plain language, we can make climate finance more accessible--and hopefully, draw broader attention to the pressing issue of how to pay for climate change mitigation and adaptation.

UPDATE 4/11/13: After this blog post was published, the OECD released updated figures for 2010 and 2011. The data still shows a decrease in commitments for adaptation, mitigation, and climate finance, as this blog post states. However, adaptation expenditures were 3 percent higher in 2011 than in 2010, as opposed to unchanged. (View updated figures.) The changes in the numbers are a result of donors entering new data for previous years or updating their old data. Preliminary data for 2012 shows that aid to developing countries continued to fall. Detailed figures for 2012 will be released in June 2013.

At the 2009 U.N. climate change conference in Copenhagen, developed nations committed to provide a collective $100 billion per year by 2020 to help developing countries mitigate greenhouse gas emissions and adapt to climate change’s impacts. Recently, the Organization for Economic Co-Operation and Development (OECD) released some surprising new data on this pledge. The figures indicate that developed nations’ recent climate finance contributions have fallen rather than risen toward the level of their 2020 commitment.

A Look at the New OECD Data

The OECD is a consortium of 34 wealthy countries. Among other joint initiatives, it provides a platform to monitor and share statistics on aid flows and climate finance contributed by its members. Most OECD members report both their climate finance expenditures and commitments using the “Rio Markers” (see text box), and the OECD secretariat periodically makes these numbers public. OECD members’ climate finance contributions represent a significant portion of the collective $100 billion commitment, so the numbers reported by the OECD give a good indication of developments in the climate finance field.

Surprisingly, new OECD numbers show that while adaptation expenditures in 2011 remained the same as in 2010, expenditures for mitigation activities decreased. Plus, the total commitment for climate finance decreased from $23 billion in 2010 to $17 billion in 2011.

While a “commitment” refers to the total amount of money a country will spend on an adaptation/mitigation project over a multi-year period—which is reported at the beginning of a project—an “expenditure” refers to the amount a country spends in a particular year on adaptation/mitigation activities. In January 2013, the OECD updated its data for 2011. It is difficult, of course, to predict or analyze trends based on only two years of data (the only data that’s currently available on OECD climate finance commitments). But given developed nations’ agreement to scale up climate finance significantly by 2020, this decrease is surprising—and could be concerning.

Research shows that developing countries will need about $531 billion of additional investments in clean energy technologies each year in order to limit global temperature rise to 2° C above pre-industrial levels, thus preventing climate change’s worst impacts. While developed countries have pledged to provide $100 billion of climate finance per year, this amount is well below what’s needed to help developing nations mitigate and adapt to climate change.

So how can countries bridge this funding gap? The answer lies in part on how well developing countries implement “readiness” activities, as well how effectively developed nations and international institutions like the Green Climate Fund (GCF) can mobilize finance to support them.

The Need for Readiness

To attract investments on the scale required, developing country governments must provide an attractive investment climate—one that encourages public and private sector investors to put their money into climate-friendly projects like solar and wind energy. On their end, developed countries need to offer financial and technical support for “readiness” activities that create the right conditions for said investments. Readiness includes any activity that makes a country better positioned to attract investments in climate-friendly projects or technologies. A few examples include: developing a policy to promote energy efficiency in industry; passing a law that gives a new or existing institution the mandate to promote renewable energy; conducting an assessment of a country’s wind energy resources; or strengthening a bank’s capacity to lend to small businesses in low-carbon sectors. International institutions such as the GCF can play a big role in supporting readiness activities, thereby helping developing nations attract the investments that will help them transition onto a low-carbon, climate-resilient development path.

After a year of extreme weather events and recent studies outlining climate change’s impacts, it’s become increasingly clear that we must understand what emissions reduction pathways are necessary to avoid these risks. The Intergovernmental Panel on Climate Change’s (IPCC) last Assessment Report, for example, outlined the emissions reductions needed from developed countries to stabilize concentrations of greenhouse gases (GHG) consistent with limiting warming to 2°C. Further research has continued to examine the global GHG emissions reductions necessary to avert dangerous climate change. And as countries implement existing policies and consider new ones, the scale of required emissions cuts is a fundamental question. In fact, it’s one of the most pressing questions facing the international climate change community.

One new study shows that we have to reduce emissions even more than scientists initially thought in order to avoid climate change’s worst impacts. A paper published in Energy Policy on February 20th by Michel den Elzen and colleagues examines new information on likely future emissions trajectories in developing countries. This includes recent clarification of assumptions and conditions related to developing country pledges. In addition, countries have also come forward with further information on their emissions projections. As a result, the report finds that developed countries must reduce their emissions by 50 percent below 1990 levels by 2020 if we are to have a medium chance of limiting warming to 2°C, thus preventing some of climate change’s worst impacts.

This level of reductions is considerably higher than what the scientific community thought was necessary to meet the 2°C goal. The most recent IPCC Fourth Assessment Reportlaid out a recipe for a medium chance[^1] of limiting warming to 2°C. This report—compiled by the world’s leading climate scientists—stated that developed countries would have to reduce their emissions by 25-40 percent below 1990 levels by 2020, and developing country emissions would have to be reduced substantially from their business-as-usual emissions trajectories.

I spent the recent U.N. climate negotiations in Doha trying to reconcile two injustices. The first is captured by Nicholas Stern’s “brutal arithmetic.” This is the simple, unavoidable fact that bold greenhouse gas emissions reductions will be needed from all countries to hold global temperature increase to 2°C above pre-industrial levels, thus preventing climate change’s most dangerous impacts. Developing nations, many of which are battling crippling poverty and inequality at home, are being told that the traditional, high-carbon pathway to prosperity is off-limits, and that they, too, will need to embrace aggressive mitigation actions. This is a glaring injustice – the product of two decades of missed opportunities in the United Nations Framework Convention on Climate Change (UNFCCC), inadequate domestic action in industrialized countries, and substantial geopolitical changes in major emerging economies.

But the second injustice is even greater – one that is manifest and which must be avoided. As the Intergovernmental Panel on Climate Change (IPCC) has illustrated, breaching the 2°C threshold would seriously degrade vital ecosystems and the communities who depend on them. This, itself, is an issue of justice, as climate change undermines the realization of human rights, including the right to food, health, an adequate standard of living, and even the right to life. Those same developing countries who are home to the poorest and most vulnerable members of our global community—and who are now compelled to act on reducing emissions—will be hit first and hardest by climate change’s impacts.

However, some question whether these funds are going to the right places and meeting real needs. Is adaptation finance being directed towards the nations that need it the most? Is it being used to support projects that will allow people to adapt to climate change’s impacts?

The Question Is: Where Should Adaptation Finance Go?

The easy answer is that adaptation finance should go to activities that strengthen the resilience and reduce the vulnerability of countries most susceptible to climate change’s impacts. People in developing countries will likely be hit hardest by global warming.

Expectations were low for this year’s UNFCCC climate negotiations in Doha, Qatar (COP 18), which concluded last week. It was scheduled to be a “finalize-the-rules” type of COP, rather than one focused on large, political deals that went into the early hours of the morning. Key issues on the table included finalizing the rules for the Kyoto Protocol’s second commitment period; concluding a series of decisions on transparency, finance, adaptation, and forests (REDD+); and agreeing on a work plan to negotiate a new legally binding international climate agreement by 2015. The emissions gap was also front-and-center, as the new UNEP Gap Report showed that countries are further away than even a year ago from the goal of keeping global average temperature rise below two degrees C.

If you asked five different people what they think “equity” means, you’d probably get five different answers. Their personal experiences and opinions would be overlaid on their cultural perspectives. A philosopher might bring up Aristotle’s teachings on justice; an economist would likely talk about maximizing utility and efficiency. A Buddhist and a Muslim might frame their answers from different perspectives that are difficult to compare, just as the viewpoints would likely vary between people raised under different forms of government.

So it’s no surprise that when climate negotiators from nearly 200 countries come together at the end of each year, they can’t agree on what exactly ‘equity’ means as applied to addressing climate change. To further complicate matters, the UN Framework Convention on Climate Change (UNFCCC) ties equity to “common but differentiated responsibilities and respective capabilities (CBDR-RC).”

There are many legitimate views of what equity means in the context of the UNFCCC, reflecting sharp contrasts on how to share both the burdens and opportunities of the global transition to low-carbon development. Some countries emphasize “responsibilities,” usually explained as the historical responsibilities developed countries have because of the greenhouse gases they emitted in the process of growing economically. Other countries focus on “capabilities,” the capacity countries have now to deal with climate change, such as their financial and technological resources to reduce domestic emissions or support adaptation research and activities. Several options for “differentiation” have been suggested over the years, including historical responsibility, levels of economic development, and vulnerabilities and needs. The current approach to equity has become a tug-of-war between countries that are reluctant to make greater climate change action commitments without assurances that others will also act.

The pace of progress on climate change is still too slow, and the political will for greater ambition remains elusive. That said, these talks did achieve the basic goal of extending the Kyoto Protocol and moving countries onto a single negotiating track toward a new climate agreement by 2015. This leaves the door open for more progress ahead.

This year's talks took place against the backdrop of two disturbing trends. On the one hand, there are multiple signs that climate change is here, and its impacts are already being felt around the world. On the other hand, the world remains tied to the consumption of fossil fuels that drive more and more greenhouse gas emissions into the atmosphere. With each passing day that we don't shift directions, we are increasingly locking ourselves into a more unstable climate future.

The real question is: Can the international talks have a real impact on climate change?